Quantifying Inverse Fair Value Gap Breakouts with Trend and Rejection Filters
Summary
The document presents an inverse fair value gap strategy for an MQL5 expert advisor. A fair value gap is defined as a three-candle imbalance; the inverse setup looks for price to revisit the latest gap and pass through it rather than react as expected. That failure is treated as a possible directional shift. The proposed rules filter setups by the position of price relative to a 400-period moving average, use a three-minute chart, validate gap and breakout-candle size, require a timely close beyond the opposite edge, and look for prior rejection around the gap. Entries are managed with take-profit and stop-loss levels and restricted trading hours.
The article says the approach was tested over five years and more than 400 trades, and describes the performance as consistent, but the provided text does not include detailed statistics needed to assess costs, drawdowns, or robustness. The author advises against excessive parameter tuning and suggests evaluating rejection counts, minimum breakout strength, and alternative exits. The strategy’s institutional-order-flow explanation is an interpretation, and its results may not transfer across securities, timeframes, or market regimes without further testing.
Key ideas
- An inverse fair value gap setup treats failure to react at a previously identified imbalance as a possible reversal or directional shift.
- The rules filter gaps using a long moving-average trend, gap size, breakout size, and timely candle closes.
- The method focuses on the most recent gap and seeks evidence of prior rejection around its range.
- Entries use defined stop-loss and take-profit levels, with trading-hour restrictions.
- The reported multi-year test lacks detailed performance statistics in the text, and parameter overfitting remains a concern.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.